In these turbulent times, it might be tempting to dump your Visa (NYSE:V) shares and stay in an all-cash position. But V stock is among the safest investments during a time when cash displacement is a global phenomenon.
In America and abroad, the way people pay and transact is changing quickly. Billionaire Ray Dalio once famously said that “cash is trash.” This might be an exaggeration, but there’s little doubt that millennials and Gen Z tend to favor digital payments over cash transactions.
As they say, the proof is in the numbers. The data will show that Visa’s payments and processed transactions are growing, including those that are cross-border. At the same time, investors can potentially beat the inflation blues by holding Visa shares for price appreciation and consistent dividend payouts.
What’s Happening With V Stock?
For the past year, V stock has gone nowhere fast. It gyrates up and down, but the $200 level is like a magnet and that’s undoubtedly frustrating for Visa’s long-term investors.
But hey, breaking even with Visa shares hasn’t been the worst-case scenario. It’s better than having lost roughly 8% of value per year with an all-cash position. Besides, cash doesn’t pay a dividend, whereas Visa offers a forward annual dividend yield of 0.79%. Plus, Visa’s trailing 12-month price-to-earnings ratio of 31.38x suggests that the stock isn’t drastically overpriced.
Furthermore, there’s a sense of safety in knowing that you’re investing in a thriving business. During 2022’s second quarter, on a year-over-year basis, Visa’s net revenue increased 25%. Also, the company’s GAAP net income grew 21%, and Visa’s GAAP earnings-per-share advanced 23%.
Enabling Cashless Payments
Where Visa really shone in Q2, however, was in the area of cross-border payments/transactions. Impressively, the company cross-border volume grew 38%. If we exclude intra-Europe cross-border volume, then the year-over-year increase jumps to 47%.
During the second-quarter earnings call, Chairman and CEO Alfred F. Kelly emphasized that in the area of consumer payments, Visa continued to “displace cash at a strong rate.” In Q2, Visa’s debit cash volumes at grew 2%, while debit payment volumes increased 12%.
Kelly further noted that cash displacement “continued around the world.” He pointed out that “Year-over-year across debit and credit, they were 7.9 billion more payments transactions and 16 million less cash transactions.” Additionally, in Q1 2022 Kelly “highlighted the shift from cash to payments volume in Latin America, and that trend continued in this quarter.”
Moreover, the shift away from cash isn’t limited to Latin America. Neil Mumm, Head of Merchant Sales & Acquiring, Visa, Asia Pacific, observed that Visa is “enabling cashless payments” in Asia, “from a bicycle shop in Vietnam to pop-up stores and street vendors in Hong Kong.” To facilitate this transition, Visa has introduced the Acceptance Fast Track Program. This program enables Asian small businesses to accept digital payments in just a matter of minutes.
What You Can Do Now
From reliable dividend payments to growing revenue and earnings, there are ample reasons to hold V stock. Cash might or might not be “trash,” but cashless payments are on the rise. Hence, Visa is anticipating this global trend with best-in-class digital-payment systems.
So, don’t let worries about inflation deter you from investing in Visa now. Granted, the stock has been stuck in a range for a while. Yet, it may be due for a breakout as Visa leads the charge in the worldwide shift away from cash payments.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.